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The IBM technology multinational and the Santiago de Chile Stock Exchange have a common commitment to innovation that goes back a few years. The recent launch of a new platform based on blockchain, marks only one of the increasing efforts of companies to optimize and develop stock investment offerings.
Following the success of IBM's first custom-built development for the financial institution, companies decided to expand their efforts toward optimizing short-sale transactions with an application based on Hyperledger Fabric. The application will be based on smart contracts to increase reliability between the parties involved, both in the loan and in the purchase of financial assets.
Andrés Araya Falcone, who has been in charge of information technology for 20 years. Stock Exchange and Martín Hagelstrom, IBM's Blockchain leader for Latin America; they spoke exclusively for CriptoNoticias of this new venture that seeks to position Chile with economies like China, Canada and Australia.
How to interest local businesses with this type of initiative? Do you think that adoption levels of territories such as Asia or Europe can be achieved?
Martín Hagelstrom: In fact, in recent years, Latin American companies have taken the lead by incorporating Blockchain technology into their business networks. to think of Blockchain far beyond crypto-currencies. We are currently working with several clients on projects and drivers developed in IBM Cloud Garages.
According to IDC, blockchain technology in Latin America will have one of the fastest growth rates, up to 2021, with 127, 3% Due to this demand and Blockchain's growth potential IBM sees in our region, we announced earlier this year the creation of the first blockchain solutions center in Latin America, located in Sao Paulo, Brazil.
Why choose blockchain to carry out this project of the Santiago Stock Exchange?
Andrés Araya Falcone: A private blockchain makes perfect sense when multiple parties want to interact and change the state of a system, and prefer to avoid centralization in a third party that provides real-time service. Thus, through the implemented digital contracts that are run in conjunction with the transactions, they can be used as a distributed state machine without trusted third parties, allowing effective implementation of new processes among the participants. In the implementation of securities lending, we set up a series of smart contracts (chaincode) using the Linux Foundation's Hyperledger Fabric framework, which allowed us to implement the segregation of roles that the network requires. [19659006] Currently, the amount traded on this market represents only 0.7% of the trading volume of the stock market, among other reasons, because of the friction that exists in the backoffice to perform this type of operations, work manual and interaction
Another reason to use blockchain is its infrastructure resiliency qualities, allowing to generate a platform that has both high availability and recovery after failure, without sacrificing transactional capacity.
How does the use of blockchain improve short selling operations?
Andrés Araya Falcone: In particular, for short selling operations and loans in general, the use of blockchain has reduced processes that could take days to complete in minutes. In addition, it allows market players to directly integrate shared information into the blockchain network into their back office processes, reducing operational costs and improving system security as a whole.
Another improvement brought by the use of blockchain C is the complete traceability of each operation. This is provided by the same block chain, where every change made to the records is permanent. This allows better internal and external regulation.
Finally, when designing this solution on blockchain technology, the entire operational flow of securities lending was redesigned in the current regulatory framework. This reengineering, based on this new technology, has created a new stream where many inefficiencies have been eliminated, both operational and implemented on previous technologies. Many processes have moved from batch mode to real time mode, with the advantage of immediate access to online information.
Is IBM planning any other similar projects in the region?
Hagelstrom: IBM is already working on similar projects, with clients in different countries of Latin America from various industries such as insurance, logistics, agriculture, and so on.
AOS in Colombia is collaborating with IBM to create a solution based on blockchain and Watson IoT in the cloud, to improve the efficiency in the processing of transactions and fees in the industry of logistics and transportation across Colombia. The solution will use the platform as an IBM Cloud service and Internet of Things for cargo truck mapping and Blockchain to manage transactions between the network of shippers, carriers and local authorities.
In Brazil, BRF and Carrefour join forces with IBM to develop the "Food Tracking" project to track products with blockchain technology. The goal is to inform the consumer, in a simple and objective way, about the origin of the food, considering all stages of activity: productive, commercial and logistical. The project was developed in IBM Garage – a space created by IBM to accelerate innovative projects and applications in the cloud.
The Mexican Association of Insurance Institutions (AMIS) in collaboration with IBM is developing a prototype blockchain solution to help ensure the authenticity of insurance policies.
In financial terms, how does the implementation of this new platform benefit the Santiago Stock Exchange? Do you think this will help reduce costs or simply increase the efficiency of your processes?
Andrés Araya Falcone: multiple benefits are expected, some directly measurable and others more qualitative. First and foremost, by reducing the friction that currently exists in securities lending backoffice processes, we expect an increase in the volume of transactions in the short selling market.
In addition, it is estimated that by reducing inefficiencies In the current processes, administrative costs will be reduced, both for the Santiago Stock Exchange and for intermediaries. This will allow efforts to be devoted to other tasks that generate value.
Regarding the qualitative benefits, the use of blockchain involves the use of strong cryptography and open standards from its base. This allows to have a more secure system against malicious attacks, to mitigate information leaks and to have the ability to rebuild all information before a catastrophic event. In our implementation, we have set up processing nodes both nationally and internationally to ensure the sustainability of the information. In addition, we worked with customers to create their own nodes. This is the case of Banchile, which, as a network participant and major player in the market, has deployed its own node and integrated its backoffices, thus increasing the efficiency of its internal processes.
To which other companies? Latin America supports IBM to improve its processes with the Hyperledger project?
Martín Hagelstrom: in addition to those mentioned above, I can highlight the case of Belagrícola, one of the largest grain companies in Brazil, adopted the IBM Blockchain technology to trace grain in the stages of agro-food chain: reception, laboratory analysis, storage, logistics and distribution. The project includes the IBM Agritech Blockchain platform and the SBR traceability software.
Featured image by Siarhei / stock.adobe.com
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